This chapter discusses how to figure your basis in property and covers the following topics.

• Cost basis of property you buy.
• Adjustments to basis after you receive property.
• Property you receive in exchange for your services.
• Property you receive because of a casualty or condemnation (involuntary conversion).
• Business or investment property you receive in an exchange or trade-in.
• Property you receive as a gift.
• Property transferred to you because of a divorce.
• Property you inherit.
• Property changed to business or personal use.
• Stocks, bonds, and mutual funds in which you invest.

Basis is a way of measuring your investment in property for tax purposes. Use the basis of property to figure the deductions for depreciation, amortization, depletion, and casualty losses. Also use it to figure gain or loss on the sale or other disposition of property. You must keep accurate records of all items that affect the basis of property so you can make these computations.

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